Distributable Profits Dividends and Corporation Tax

Distributable Profits Dividends and Corporation...

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Hi all,

My company was established in 2006 and I want to pay for the first time a dividend on 6 April 2008. I am confused on how to calculate the distributable profits available for paying dividends.

Question 1:
I am using QuickBooks for my accounts. My ARD is on 31/12 and I have already paid my corporation tax (CT) for 2006. In order to calculate the CT I will prepare a balance sheet for 31/12/2007 and one for 06 April 2008 to find the net profit and then calculate the CT for each period. I will then add the Net Profit for 2006, 2007 and the NP for 01/01/2008 until 06 April 2008 and subtract the CT for 2006 and the CT until 06 April 2008 in order to calculate the total distributable profit. Is that the correct way to calculate the total distributable profit?
Question 2:
What are the entries required in the accounting books (QuickBooks)? I was going to credit the bank account and then debit a Dividends account. Is that correct?

Question 3:
How are dividends displayed in P&L and in the balance sheet?

Question 4:
I will soon receive a refund because I have overpaid my CT for 2006. What entries are required to reflect this and how will my 2006 accounts be affected? I have already sent the 2006 accounts to Companies House.

Many thanks in advance for your help.

Alex B

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By User deleted
24th Apr 2008 09:35

Alex
Sounds like you need to go on a bookkeeping course.

CT refunds get posted against CT charged to P& L. In the later year if necessary.
Dividends appear on the P & L, just before retained profit for the year.

Nichola Ross Martin
Tax editor, AccountingWEB.co.uk

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